Indonesia Expected to Become a More Significant Player in the Global Commodity Market

July 15th, 2016

By - CEM Team

Indonesia is considered to have successfully implemented the biggest opening to foreign investors in the past decade after the new administration took over. The government has been pushing for reforms, including reducing the red-tape associated with the bureaucracy, promoting special economic zones and spending on ports, roads and other infrastructure projects. The government has also indicated its willingness to promote foreign trade by signing the Trans-Pacific Partnership led the by the United States of America.  The commodities sector has been an incredible beneficiary of this progress.

In the first quarter of 2016, Indonesia’s GDP growth was at a respectable 4.92%. Manufacturing and industry accounted for 46% of this growth, while mining accounted for about 12%. The contribution of this sector is only expected to increase in 2017.

Coal mining companies have posted impressive growth figures in the recent past, with Bumi Resources up 52% YTD and Tambang Batubara Bukit Asam Peresro up 63% YTD. However, none of these figures come close to Delta Dunia Makumur’s growth of 261% YTD. Indonesia has power plant projects totalling to 35,000 MW being installed in the coming years, driven by increasing domestic demand. This is expected to further boost the coal industry.

Investors from Australia and United Kingdom have shown keen interest in the country’s gold resources as well, with the government being asked to reopen its mine in the Buru Island. In 2015, Indonesia produced 109 tons of gold, contributing 3.5% to the global gold production. With the new mine being opened up, Indonesia is expected to drastically increase its gold production.

Indonesia relies heavily on the export of raw commodities. In order to deliver value added products, Indonesia is now looking towards stimulating downstream processing industries. The export industries to be majorly impacted by this are mining and minerals

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